The minutes of the March 22 meeting of the

Federal Open Market Committee

appear to show a smaller degree of concern about inflation risks than some may have feared. They also provide guidance on how to both anticipate and interpret an eventual change in upcoming policy statements, particularly with respect to the use of the word "measured."

The minutes cut to the essence of what has ailed the financial markets over the past two months, ever since Fed Chairman Alan Greenspan delivered his semiannual report to Congress on Feb. 16 and indicated that his concerns about inflation had increased.

The chairman's hawkish testimony was a catalyst for a sharp tightening of financial conditions: lower stock prices, higher bond yields, wider credit spreads and a stronger dollar. The tightening was reinforced on March 22 in response to the Federal Reserve's policy statement, which indicated that the FOMC's concerns about inflation had increased:

Though longer-term inflation expectations remain well contained, pressures on inflation have picked up in recent months, and pricing power is more evident.

Whether the recent tightening of financial conditions continues depends a great deal upon the extent to which the March 22 minutes are perceived to reinforce the interpretation that followed both Greenspan's testimony and the Fed's policy statement. At first blush, it appears that the markets believe that the discussions at the Fed meeting were actually somewhat more benign than expected, owing to the fact that the Fed's views about inflation were more sanguine than the policy statement might seem.

(Indeed, major equity averages jumped sharply after the 2 p.m. EST release of the minutes; the

Dow Jones Industrial Average

, down more than 70 points before the minutes were unveiled, was recently up nearly 30. Meanwhile, the dollar retreated and Treasuries rallied.)

While the minutes reinforce the notion that the Fed's worries about inflation have increased, they do not signal that a shift toward a more aggressive stance is on the near-term horizon. Investors might therefore be relieved to learn that the Fed has no plans to shift to 50-basis-point rate hikes. Nevertheless, with the Fed indicating a heightened degree of concern about inflation, any relief in the markets probably won't go too far, especially in the bond market, which faces the possibility of at least several more interest rate hikes.

Risks of a Surprise

The likelihood of a major surprise in today's minutes was low. There have been no hints at a shift in policy in any of the recent speeches delivered by both the voting and non-voting members of the FOMC. Moreover, the Fed has endeavored to increase its transparency in recent years, as evidenced by the fact that the minutes are now released three weeks after FOMC meetings instead of six weeks. Today's minutes in fact mention the importance of telegraphing changes in the FOMC statements:

... it was also averred that the Committee should, to the extent possible, provide information that would help the public anticipate the probable course of monetary policy; providing such information would tend to increase the effectiveness of monetary policy.

An extraordinary example of the extent to which the Fed is making a large effort to be transparent about its policies occurred on April 1, the day that the government released its monthly employment statistics. Moments after the release of the report, Chicago Fed President Moskow appeared on


and commented on the job situation, the economy and interest rates.

In light of the Fed's efforts at increasing its transparency, it would have been especially surprising to the financial markets if the minutes were to differ from what has been transcribed from Greenspan's recent testimony, Fed speeches and the March 22 FOMC statement. Nevertheless, investors are still relieved that there were no surprises in light of the more hawkish tone taken since Greenspan's February testimony.

Much attention will of course be given to the discussion of whether the word "measured" will be removed from future policy statements. The Fed gave it attention in a way that has soothed investors by indicating that the removal of "measured" would be sought simply to give the Fed added flexibility to


pause or accelerate its pace of interest rate hikes:

Members ... believed that the wording did not rule out either picking up the pace of firming or pausing in the process of removing policy accommodation should circumstances warrant.

Henceforth, the removal of "measured" from the Fed's future policy statements is likely to ruffle fewer feathers than would have been the case before today, owing to the clarification provided in the minutes on what removing the "measured" would actually mean. Many are likely to also be bulled up by even the mere mentioning of a pause.

Tony Crescenzi is the chief bond market strategist at Miller Tabak + Co., LLC, and advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. At the request of the Federal Reserve, Crescenzi is a regular participant in the board's Livingston Survey of economic forecasters. He is also the author of

The Strategic Bond Investor. At the time of publication, Crescenzi or Miller Tabak had no positions in the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Crescenzi also is the founder of, a popular Web site covering the bond market and the economy. He appreciates your feedback and invites you to send it to has a revenue-sharing relationship with under which it receives a portion of the revenue from Amazon purchases by customers directed there from